Trading education » Odds

Learn Currency Trading – 5 Common Deadly Mistakes

admin — Mon, 28 Jun 2010 06:58:59 +0000

If you want to learn currency trading you need to get the right forex education and avoid the mistakes of the losing majority. The mistakes below are common ones but there easy to avoid and you must do so if you want to enjoy currency trading success.

1. Following a Vendor Blindly

One of the most common errors is to think someone else can give you success – they can’t.

Most systems sold are junk – but even if you do find a good one, how can you follow it with discipline if you don’t know how it works?

You cant to have discipline to follow a system you must have confidence in it so you need to take the time to develop your own trading system or have total confidence in someone else’s logic.

2. Trading News Stories

We have more news at our disposal than ever before and all those stories are very convincing – but that’s all they are stories. The news reflects the greed and fear of the crowd and they lose longer term – try and trade news stories and you are guaranteed to lose as well.

The best way for any novice to trade is to simply follow the reality of price action on a forex chart and trade it – your trading the truth not an opinion and that is the only way to win.

3. Day Trading

Simply the dumbest way to trade.

It doesn’t work as all short term volatility is random and you can’t get the odds in your favour.

Don’t believe me?

Try and find a forex day trader with a real ( not simulated ) track record that’s made real dollars over the long term. Let me know if you find one I have been searching for 25 years and still not found one!

Avoid day trading at all costs!

4. Trying to Predict Forex Prices

If you try and predict prices in advance you’re hoping or guessing and that won’t get you anywhere in life and certainly not forex trading.

You must not predict wait for momentum to confirm a turn and you can look up how to do this in our other articles – it is essential to confirm a price turn, rather than simply guess when it might come.

5. Markets are Scientific

It’s amazing how many people buy into this myth yet it’s obviously not true.

Why?

Because if prices did move to a scientific theory, there would be no market, as we would all know the price beforehand and there would be no market. The reason a market moves is because we all have different opinions of where the price may go.

The far out investment crowd love scientific theories and like to follow the works and methods of gurus such as:

Gann, Elliot and Fibonacci.

Well they made no money with their theories in forex trading and neither will you.

So if you want to learn currency trading correctly avoid the common mistakes enclosed and work and getting a simple forex trading system which will help you trade the odds, you can understand and can apply with discipline.

If you learn currency trading the correct way ( and 95% of traders don’t ), then you can enjoy currency trading success and create a life changing income – good luck!

By: Kelly Price

Commodities Trading – Basic Risk Management – Hedging

admin — Wed, 09 Jun 2010 06:19:50 +0000

If you’re a commodities trader or are looking to become one, you know that two elements motivate you: speculation and hedging. Although speculation and hedging are not mutually exclusive and you can do both at the same time, speculation is primarily profit oriented. Hedging is more about protecting your profits or minimizing a potential loss and is therefore a defensive strategy.

When you hedge, you essentially recognize a hard fact; that is, traders cannot predict prices correctly all of the time. If you want to be on the right side of the trade, you need to not just to predict what direction prices are going to go in, but you also need good timing.

Although it’s important to guess correctly whether prices are going to move up or down, you also have to know when you should get in and when you should get out. You can improve your odds of doing so with some simple hedging strategies.

To begin with, let’s talk about a few elementary concepts. Hedging is effective, in part, because prices for commodities in the cash — i.e., spot — markets tend to move together, whether up or down.

In a “spot” or cash market, physical commodities are bought and sold. This differs from the futures market, where contracts are traded for future delivery of the particular commodity.

Even so, spot prices don’t move exactly together. The difference between the spot price and the current contract price is called the “basis.” The basis equals the cash price minus the futures price.

When they hedge, investors have two basic alternatives, either going short or going long. However, these two strategies are not used only to the exclusion of each other. They can be used together in a mixture, tailored to an investor’s needs. If you “go long,” that means you’re buying in order to sell later at a higher price. If you “go short,” that means that you’re going to sell before you buy, and expect that the particular commodity will have a future price decline.

In regard to going short, it might confuse you to think that you’re actually going to sell something you haven’t bought first and therefore don’t own. However, when you go short, you borrow the commodity or contract from the broker, sell it, and then buy the equivalent later to “balance the books.”

When you go long, you hedge based upon a weakening basis as the cash price falls in relation to the public futures contract. Going short gives you the advantage when the basis is increasing; that is, when the cash price rises relative to the futures contract price. It should be noted that a basis can rise or fall in opposition to price levels. What matters is the difference between the two.

To clarify, let’s look at the following:

Let’s say a heating oil seller wants to hedge 50% of the anticipated April production of three million gallons. The seller goes short by selling the April heating oil futures contracts at $1.98 per gallon on March 1. By the end of March, cash and futures prices both have fallen. This means that on April 1, when the seller delivers heating oil to the local terminal, the price has fallen to $1.85 per gallon. The seller then simultaneously hedges by purchasing April ethanol futures at $1.90 per gallon.

Because the standard heating oil contract covers 42,000 gallons, the speculator has to purchase 35.71 contracts at this scenario. However, partial contracts aren’t traded. The following figures are approximate, to make demonstrating this scenario easier:

Date Spot Market Futures Market Basis

Mar 1, $1.88 per gal. Sell in April at $1.98 per gal. -$0.10

Apr 1, $1.85 per gal. Buy in April at $1.90 per gal. -$0.05

The hedge result is as follows:

The gain on the futures trades is $.08 per gallon, with the sell in April at $1.98 per gallon, and the buy in April at $1.90 per gallon. $1.90 minus $1.98 equals $.08 per gallon.

The net sales price is $1.93 per gallon, or $1.85 plus $.08.

This results in 50% being hedged at $1.93 per gallon, with an April income of $2,895,000, or $1.93 per gallon times 1.5 million gallons. The remaining 50% is unhedged, at $1.85 per gallon; April income is $2,775,000, or $1.85 per gallon times 1.5 million gallons.

The average April sales price is $1.89 per gallon, for an April income of $5,670,000.

Without hedging, what would have been with the result? The seller would have received $5,550,000, or $1.85 per gallon times three million gallons. By hedging between the spot and futures markets, there was a net increase in April heating oil income of $120,000. Therefore, hedging cannot only help to protect traders from losses, but it can also increase profits.

By: Amar Mahallati

Stock Market Trading Strategies – Step Two of the Wyckoff Method

admin — Wed, 12 May 2010 00:46:05 +0000

Step two of the Wyckoff method is very simple, but yet so very important in achieving consistent success in the market.

Wyckoff teaches us to always trade stocks that are in harmony with the market. The trend of the market as indicated by the Wyckoff Wave indicates the line of least resistance. It reflects the direction in which most of the individual issues are moving. Traders who take positions that are in harmony with the line of least resistance are more likely to experience positive results than are traders who try to fight the trend. It is always better to have the market working for you than against you. There are always individual issues that make huge moves against the trend, but these are relatively rare.

The odds of finding one of these counter trend wonders are much smaller than are the odds of selecting an issue that is going to perform as well or better than the trend of the market.

Trading in harmony with the market means taking long positions when the market as measured by the Wyckoff Wave is in a defined up trend channel.

It means taking short positions when the market is in a defined down trend channel. When the defined trend is neutral or a trading range, trading in harmony with the market can mean standing aside and let the bulls and bears battle for control of the action, or consider opportunities on both sides of the market.

However, Wyckoff discourages being in positions on both sides of the market at the same time. Theoretically, trading both sides at once while the market is in a trading range is possible, but it is emotionally difficult. Whenever emotions enter the picture, the odds of making costly mistakes increases.

To avoid these errors make a commitment to never be long and short at the same time.

Just because the trend of the market and that of an individual issue are pointed in the same direction does not mean that the trader automatically has a green light to take a long position if the trends are pointed upward or a short position if the trends are pointed downward.

Remember what Wyckoff teaches in step one of the Wyckoff method. Knowing the position of the price in the trend is as important as knowing the direction of the trend. Situation where the market and an individual issue under consideration for a long position are both located near the top of their up trend channels should be avoided in favor of those where the positions are near the bottom of the trend channels. When short positions are being considered in down trends, it is best to locate those situations where both the market and the individual issue are positioned near the top of their down trend channels. If trading ranges are going to be traded, look for those instances where both the general market and the individual issue are positioned near the very top or the very bottom of their trading ranges.

An important concept in applying step two of the Wyckoff method is relative strength and/or weakness. Although most individual issues will be in the same trend as the general market and many of them will even be in the same position in their trends as the market, not all of these are the best candidates for new positions. All up trends and down trends are the result of a series of trusts in the direction of the trend separated by corrections. Some individual issues that are in harmony with the market from the stand point of the direction in which their trends are pointed will make relatively larger thrusts and experience relatively smaller corrections than the market as a whole.

These are the issues that are most likely to have the best potential to produce a profitable trade. Relative strength or weakness can be measured as soon as the first thrust in a trend has been completed. This will likely be even before the trend channel has been clearly defined. Those issues that have made larger thrusts than the market are the ones that should be watched closely as the prices make their first correction. The issues that have made the largest thrusts relative to that made by the market and that then make the smallest corrections relative to the market are most likely to perform well on the next thrust in the direction of the trend. These are the stocks that deserve the most consideration for new positions. This technique can also be used later in the development of an advance or decline when there are additional thrusts and corrections to consider. Those issues that most consistently out perform the market are most likely to produce a profitable trade.

The concept of relative strength and weakness can be helpful in locating trade candidates when the market is in a defined trading range. If the market is in a trading range, most individual issues will also be in trading ranges. However, some will be in up trends and some will be in down trends. Those that are trending up or down are relatively stronger or weaker than the market. These are the issues to consider first when looking for new positions. However, consideration must always be given to the position of the market in its trading range and the individual issue in its up or down trend. If both positions do not favor the likelihood of a rally or reaction, opening a position in that individual issue is discouraged. After the stocks that are trending up or down, attention can be directed to those that like the market are also in trading ranges. Here again, the positions of both the market and the stock are important issues to consider before opening a position.

The merits of trading in harmony with the market may seem obvious. However, most traders are exposed to a stream of market noise from brokers, friends, relatives, co-workers and the media. This bombardment of frequently conflicting information and misinformation can cause a trader to get distracted from those things that are really important. Step two of the Wyckoff method is one of those really important things. It along with the other four steps of the method are the best foundation on which to build a successful market operation.

© The Jamison Group, Inc.: Trade the Stock Market- Step two of the Wyckoff Method

By: Craig Schroeder

Learn Currency Trading – 3 Simple Tips Anyone Can Apply to Make Triple Digit Gains

admin — Tue, 11 May 2010 14:18:21 +0000

If you want to learn currency trading then most of the information online will not help you win, as the majority loses. The information in this article is not commonly accepted wisdom and that’s why it works…

Let’s look at how to make more money from currency trading

Tip 1 Cut Trading Frequency

How many traders try forex scalping and day trading – a huge amount and how many win long term – none. Why? Because they are trading random moves and cant get the odds on their side and lose.

The first tip is all about trading less and making more – because you are focusing on the high odds trades.

I know traders who only trade a few times a month but make huge gains, because they understand that they should only hit the best opportunities and you should do this to.

Forget day trading and focus on the big longer term trends that make the big profits, these trends last for weeks months or years and you only need to catch a few each year to turbo charge your gains.

Tip 2 Risk More Per Trade

This isn’t being rash this is common sense.

Read most so called experts online and they say risk up to 5% only! Well that’s fine, if you are trading 100,000 – but most traders are not, there trading an average $1,000 so 5% risk = $50.00, well you are going to get stopped out by random volatility.

These traders, really ought to brush up on an essential bit of forex trading education which is – standard deviation of price and they will see why it doesn’t work.

If you are trading a high odds trade – risk more – Up to 20%.

Keep in mind that most traders risk so little, their guaranteed to be stopped out. They try and avoid risk so much, they actually create it.

If you don’t want to risk a meaningful amount, you won’t make a decent profit.

Tip 3 Trail Stops Slowly

This is really related to the above point – don’t trail your stop to close, give the market room to breathe so you stay in the big trends as long as possible. You have to do this and it takes discipline and it’s not easy to take open equity dips but have the discipline to do it and you can make huge gains.

The above is really common sense and seeing currency markets for what they are – a risk market where you need to take meaningful risks at the right time to win.

If you try and restrict risk to much you will lose.

Learn to Love Risk!

See risk as opportunity, have the courage of your conviction, trade high odds trades only have the courage of your conviction, trade with discipline and you will be well rewarded and enjoy currency trading success.

By: Kelly Price

Forex Trading Myths – The Myth You Can Predict Forex Prices In Advance

admin — Sat, 01 May 2010 03:16:48 +0000

I see numerous advertisements from gurus and system traders who say they can predict prices in advance with science – but this is impossible and if you try it you will lose. Avoid this forex myth and learn a better way to trade…

Predicting is another word for hoping and guessing and if you predict, your prediction in forex will be as accurate as your horoscope! You don’t get anything in life for hoping or guessing and the same is true in forex trading.

Why there is No Way to Predict

There is a huge industry online that sells courses and currency trading systems based upon the law of human behaviour.

Human nature is constant they argue and they know the law – follow it and you will predict and win but there’s a problem with this logic:

If there was a scientific law of investing everyone would know where prices were going and there would be no price movement! Furthermore, if a law is based on science it needs to be totally objective and work all the time – that’s the scientific definition. If someone had found the law of market movement they wouldn’t tell you or me they would simply make themselves billionaires.

The theories Of The Far Out Crowd

The most common methods that are sold which are supposed to be scientific are based on:

- Elliot Wave

- WD Gann

- Fibonacci

Are any of them scientific and tell you what to do?

Of course not, there all subjective and that’s not scientific by definition. Elliot died poor, Gann made a lot of money then dumped it and poor Fibonacci – his theory (which was to solve a puzzle of multiplication) has been hijacked for something it was never intended.

The far out investment crowd, love all the above theories and there mystical connotations – but they are not scientific and are not objective.

If it’s not objective and doesn’t work all the time – it’s not scientific – PERIOD

The REAL Way to Win

Trading is not a game of science it’s a game of odds. Just like the poker or blackjack player doesn’t win every hand you won’t win every trade but you can make a lot of money by trading when the odds are in your favour.

Trade the reality of price change as it happens and don’t predict. Sure you will miss a bit of the move but you wouldn’t be able to see that anyway so there is no point in trying.

Can you make a lot of money doing the above?

Of course you can – it’s the only way to make big gains.

Try trading a breakout method – this means basing your forex trading strategy on buying new highs and selling new lows. It’s a fact that most major forex trends start from these levels and if you wait for them and trade them, you will make a lot of money.

Leave science to the far out crowd and get a forex trading system that’s based around trading the truth and reality of price change and trade the odds.

The scientific theory of human nature is one of the biggest forex myths out there.

Sensible and logical people in other walks of life for some reason believe them despite the fact there obviously isn’t one – don’t make the same mistake.

By: Monica Hendrix

Best Forex Education – The Best Ways the Learn FX Trading Techniques For Huge Gains

admin — Sun, 28 Mar 2010 03:14:20 +0000

Here we will look at the best Forex education to get you on the road to trading success including, the best free education, sources to avoid and the best ways to learn quickly.

Let’s first, look at some education you need to avoid and top of the list are any Forex robots and sure fire trading systems. The cheap Forex robots all lose money and anyone who thinks, they are going to make money by spending a hundred dollars and just sit back as the money rolls in, is going to end up disappointed.

Also ignore any systems which claim they have found the natural order of market movement and they can see the future if you try them, you will see there as accurate as your horoscope.

Forex trading is a game of odds not certainties and to get the odds on your side, let’s tart with the best free education, there is plenty of information that costs nothing and can get you on the road to Forex trading success. The best way to make money in Forex is to become a chartist, its time efficient and works.

All you need to do is learn high odds chart patterns and you will find all the information on how to do this free online. Learn all the best patterns and add a few confirming indicators to help time your trades and you will have a robust system which can make money.

Forex trading is not just about learning a system, its about getting the right mindset to succeed, 95% of traders lose money, always have and always will, because human nature is constant and losing traders cannot trade with discipline. Go to your local online book store and seek out some books by from successful traders and one of the best is Market Wizards by Jack Schwager. This book interviews true trading legends, who all give an insight into how to get the right mindset for success.

If you want to cut your learning curve and get ready made strategies you can try for free, you can try a Forex course. Forex courses come with proven strategies, daily classrooms so you can see the strategy in action and unlimited support. They all come with money back guarantees, so if you don’t think they have helped you become a more successful trader, you can get your money back. These courses are ideal for the trader who wants some guidance and wants to cut their learning curve.

The best Forex education comes in many forms and your personality, will determine the method you choose to learn Forex trading and remember,no other industry can reward you so well for your efforts so learn Forex trading the right way and get on the road to a great second income in 30 minutes a day.

By: Kelly Price

Forex Education – The Scientific Theory of Market Movement

admin — Tue, 09 Feb 2010 03:25:39 +0000

Human nature is constant and humans decide the price in any market and many new forex traders as part of their forex education look to follow one of the many scientific theories to help them predict market movement and enjoy currency trading success, let’s look at them…

You will see lots of forex trading systems say they can predict market tops and bottoms with scientific accuracy but how accurate are they?

The major scientific theories are those based upon the works of Fibonacci, W D Gann and Elliot.

The above theories and any others that claim that markets move to science are wrong markets don’t and cant by there very nature.

Why?

Because humans are not logical and do not conform to a universal ideal and this should be pretty obvious as if there was a scientific theory of human nature we would all know the price in advance and there would be no market.

It’s a fact that if any of the so called scientific theories worked everyone would follow them and of course they don’t. Fibonacci, Gann and Elliot made no money with their theories but that still doesn’t stop the far out investment crowd claiming they work when they quite obviously do not.

Trade to Win By Trading the Odds

If you want to win at forex trading, don’t look for something that doesn’t exist and look at the right way to trade forex markets to win and that means trading the odds.

An essential part of your forex education should be that, forex is a game of odds NOT certainties. Don’t let this dishearten you though – if you learn how to trade the odds and use a simple soundly based forex trading strategy you can win and win big.

The fact is markets move based upon the supply and demand fundamentals and human perception of them. At certain times greed and fear take hold and humans push prices to far from fair value and a price spike occurs.

These short term price spikes are easy to see on a forex chart and can be traded for profit. Sure you won’t win every trade- but if you win more than you lose, keep your profits small and run your profits you can make huge profits.

Today science has enriched our lives and we marvel at some of the advances that are made. You can however only apply science in certain areas and forex trading is not one of them.

Keep It Simple!

Forex trading remains and always will be, odds based game and if you think about it 95% of traders lost 50 years ago and 95% lose today despite all the advances in science and forecasting.

Forex trading relies on a simple method and your ability to execute it with discipline through periods of losses to achieve currency trading success.

If you get the correct forex education and learn how to do this, you may not be perfect with every trade – but you will make a lot of money.

By: Kelly Price

Forex Education – Why You Can’t Predict Forex Prices

admin — Mon, 08 Feb 2010 09:22:29 +0000

Many traders make the mistake of thinking that they can predict forex prices in advance. If you believe this, then you need the forex education enclosed in this article. Let’s look at why you can’t – but why it won’t stop you from enjoying currency trading success.

If you think about it – it’s obvious why you can’t predict prices in advance, because if you do, you are hoping or guessing and that won’t get you very far in life or forex trading. You will find out that your predictions are no more accurate than your horoscope.

There is a school of thought that because human nature is constant, then prices must move to a scientific theory – but they don’t. Human nature is not predictable in absolute terms and if of course there were a scientific theory of market movement, we would all know the price in advance and there would be no market. Markets actually move because human nature is unpredictable.

So if you can’t predict prices in advance then how can you win? The answer is to look for high odds chart formations and then confirm each and every trading signal with price momentum.

For example, let’s say you see prices coming into a strong level of support on your forex chart and you want to execute a trading signal – rather than plunging straight into the market, you wait for a test of support and prices to move back the other way.

Essentially you are looking for price momentum to turn around and move away from the support level, and then you execute your trading signal. Now you won’t be right in at the bottom of the move however as you can’t predict than anyway, it’s no big deal but you will have the odds on your side and the chances that the trend will continue.

How do you know momentum has changed?

You need to get familiar with momentum oscillators. We don’t have time to discuss them in full detail in this article (simply look at our other articles) but you can get a great trading edge by using them in your forex trading strategy.

Two of the best are the stochastic and Relative Strength Index (RSI). There both visual set ups and a quick glance at either of them, will help you determine if price momentum is turning or not. There are of course lots of others but the above are two of the best.

Successful forex trading is all about getting the odds on your side. If you use momentum you will achieve this – you’re not out for perfection with your market timing, you’re looking to make money and that’s it.

So make momentum oscillators and there application, part of your essential forex education and they will lead you to currency trading success.

By: Monica Hendrix

Best Forex Education – FX Robots Vs Currency Trading Courses, Which is the Best Way to Learn?

admin — Fri, 22 Jan 2010 04:43:02 +0000

If you are new to Forex trading and you want some help and guidance, the two most popular choices are Forex software packages or FX courses but which is the best option for you, let’s take a look at both methods.

Forex robot software looks attractive because for a hundred dollars or so you are promised an income for life and the only effort you have to make is plugging it in then, you sit back and the money rolls in. That’s the theory but in practice these systems destroy users money quickly.

A close look at the track records, shows there simply made up either in simulations going back on past data knowing the closing prices or the vendor produces figures, they say are true but there is never any verification of results from an outside party.

These systems give Forex trading a bad reputation and are simply so cheap because they don’t work.

So are Forex courses a better of way of learning to trade?

Forex courses give you strategies from real traders and these are proven to get the odds on your side and while you have to make some effort to learn the tools, the rewards for your effort will be well rewarded. In addition the best Forex courses come with daily currency trading classrooms, where the vendor will demonstrate in real time how effective the strategy is, so you can see it profitability. They also normally come with money back guarantees so if you learn risk free.

In Forex trading 95% of traders lose and to win, you need to make an effort, there is no shortcut to success and Forex robots will lose you money. On the other hand, Forex is a learned skill and a good course can cut your learning curve and get you on the road to triple digit gains in around 30 minutes a day.

By: Michelle Hendrix

Forex Education – 20 Questions That Will Tell You If You Can Win At Forex Trading!

admin — Wed, 13 Jan 2010 09:41:19 +0000

Forex trading isn’t easy and you wouldn’t expect it to be with the rewards on offer but its not hard either – if you get the right forex education. If you look at the questions below and answer them correctly yes or no, you are learning forex trading the correct way and likely to be successful.

10 Questions you must answer NO to below:

1. I believe the more knowledge I acquire and the harder I work the more successful I will be.

2. Complicated systems are more likely to successful than simple ones.

3. The more news stories I study and trade the more chance I have of making money.

4. Day trading is a great way to make money.

5. Markets move to a scientific theory because human nature never changes.

6. You never go broke banking a profit.

7. You need to predict markets in advance to win at forex.

8. I can buy an e-book from a guru and just follow it they know best.

9. If I am always in the market the better my chances of success as I wont miss a move.

10. Buy low and sell high is a great way of making money.

If you agree with any of the above statements you will lose money.

They are all common forex myths believed by the 95% of traders who lose money.

If you answered no congratulations – you’re learning forex trading the right way.

Now – here are 10 questions you should answer YES to.

1. I know that success comes from within and no one else can give it to me.

2. If I devise my own trading strategy I will acquire confidence and discipline.

3. Simple systems work best as they are more robust than complicated ones.

4. Forex trading is not a game of science it’s a game of odds.

5. I need to run the long term trends to make money all short term.

6. All short term daily volatility is random and is un-tradable.

7. I don’t predict market moves I simply respond to the reality of price changes.

8. I buy markets when they break to new highs because most big moves start from new market highs NOT market lows.

9. I trade infrequently and only trade high odds set ups.

10. I don’t need to acquire lots of knowledge just the right knowledge then I am done.

Did you answer yes to the above questions? – then well done! Your learning the right forex education.

Now if you have got them all right so far, here is one final question to determine if you are likely to be a winner:

My trading edge is (defined)

If you don’t know what your trading edge is – you don’t have one!

Your trading edge is the reason you will succeed and the vast majority fail.

Forex trading is all about getting the right forex education, ignoring the myths and focusing on the right information.

You need to build a system you can have confidence in which will give you the discipline to trade for long term success through inevitable losing periods.

The rewards of trading forex are immense and the amount of money you can earn can be life changing and if you get the right forex education you can enjoy long term currency trading success.

If you have the desire to be a winner and can accept you are responsible for your own destiny then the vast rewards of forex trading await you.

By: Kelly Price